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DECREE

Promulgating the Regulation on management of foreign loans and repayment of foreign debts

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the December 16, 2002 State Budget Law;

Pursuant to the December 12, 1997 Vietnam State Bank Law and June 17, 2003 Law Amending and Supplementing a Number of Articles of the Vietnam State Bank Law;

Pursuant to the December 12, 1997 Credit Institution Law and the June 15, 2004 Law Amending and Supplementing a Number of Articles of the Credit Institution Law;

At the proposal of the Minister of Finance,

DECREES:

Article 1.- To promulgate together with this Decree the Regulation on management of foreign loans and repayment of foreign debts.

Article 2.- This Decree takes effect 15 days after its publication in "CONG BAO" and replaces the Government's Decree No. 90/1998/ND-CP of November 7, 1998.

Article 3.- The Minister of Finance, the Governor of the State Bank of Vietnam and the Minister of Planning and Investment shall have to implement, guide and inspect the implementation of, the Regulation on management of foreign loans and repayment of foreign debts, promulgated together with this Decree.

Article 4.- Ministers, heads of ministerial-level agencies, heads of the Government-attached agencies, presidents of provincial/municipal People's Committees, and heads of relevant agencies shall have to implement this Decree.

On behalf of the Government

Prime Minister
PHAN VAN KHAI

REGULATION ON MANAGEMENT OF FOREIGN LOANS AND REPAYMENT OF FOREIGN DEBTS

(Promulgated together with the Government's Decree No. 134/2005/ND-CP of November 1, 2005)

Chapter I

GENERAL PROVISIONS

Article 1.- Regulation scope

This Regulation governs the raising of foreign loans, repayment of foreign debts and management of Vietnam's foreign debts, except for loans raised and debts repaid by residents being Vietnamese individuals.

Article 2.- Interpretation of terms

In this Regulation, the following terms below are construed as follows:

1. Foreign loans mean loans raised by residents of a country from non-residents.

2. Vietnam's foreign loans mean interest or interest-free short-term loans (of up to one year), medium- or long-term loans (of over one year) raised by the Vietnamese State, Government or organizations being residents in Vietnam (hereinafter called borrowers for short) from international financial institutions, governments of foreign countries, organizations or individuals being non-residents (hereinafter called foreign lenders).

3. Residents in Vietnam and non-residents shall be determined according to current provisions of law on management of foreign exchange.

4. Foreign loans of the Government mean preferential loans in the form of Official Development Dssistance (ODA), commercial loans or export credits, and loans from the international capital market (by way of issue of bonds to foreign countries), which are provided under agreements concluded with foreign lenders by authorized agencies of the Vietnamese State or Government in the name of the State or the Government of the Socialist Republic of Vietnam.

5. Foreign loans of enterprises mean loans provided to enterprises or economic organizations established and operating under current provisions of Vietnamese law (hereinafter called enterprises for short), which conclude loan agreements directly with foreign lenders by mode of independent borrowing and repayment or borrowing through the issue of bonds in foreign countries or financial hire-purchase with foreign parties.

6. ODA loans mean loans meeting the ODA capital conditions prescribed in the Government's Regulation on ODA management and use.

7. Foreign commercial loans mean Vietnam's foreign loans other than ODA loans.

8. National foreign debts mean the balance of all current liabilities (excluding reserve liabilities) in relation to the repayment of principals and interests of Vietnam's foreign loans at a time. National foreign debts include foreign debts of the public sector and those of the private sector.

9. Foreign debts of the public sector include foreign debts owed by the Government, foreign debts (if any) owed by provincial/municipal administrations, foreign debts owed by state enterprises, state-run financial or credit institutions and state-run economic organizations (hereinafter called state enterprises for short), directly to foreign parties.

10. Foreign debts of the Government mean the balance of all current liabilities (excluding reserve liabilities) in relation to the repayment of principals and interests of the Government's foreign loans at a time.

11. Foreign debts of the private sector mean foreign debts of enterprises and economic organizations in the private sector (hereinafter called private enterprises for short).

12. Foreign loan guarantee means a commitment made by a guaranteeing body to a foreign lender for the full and timely repayment of the debt by the borrower (the guaranteed). Where the borrower (the guaranteed) cannot repay the due debt, the guaranteeing body shall have to repay such debt on behalf of the borrower (the guaranteed).

13. Government guarantees for foreign loans means that the Government, through the Finance Ministry, commits to guarantee the borrowing of foreign capital for a borrower.

14. Debts guaranteed by the public sector means debts the repayment of which (principals, interests, charges...) is guaranteed by the Government or licensed organizations in the public sector (state-run financial or credit institutions) in accordance with current provisions of law.

15. Reserve liabilities mean latent liabilities which have not yet arisen but may arise under one of the pre-determined conditions (for instance, when the guaranteed cannot repay a part or all of their debts, go bankrupt, etc.)

16. National long-term strategy on foreign debts (called long-term debt strategy for short) means a document setting forth objectives, orientations, solutions and policies for management of national foreign debts, included in the overall strategy on mobilization of investment capital for the economy, and compatible with five-year and 10-year national socio-economic development strategies.

17. Medium-term debt management program means a document concretizing the long-term debt strategy for a period of between three and five years, which shall be updated annually in compatibility with the framework of financial and economic policies as well as the Government's medium-term and annual budget targets.

18. Annual plans on the raising of foreign loans and repayment of foreign debts mean documents elaborated annually, which include plans on withdrawal of loan capital and repayment of foreign debts of the Government, enterprises as well as organizations in the public sector, and the total limit of national foreign commercial loans.

19. Managing agencies mean ministries, ministerial-level agencies and provincial/municipal People's Committees.

20. Re-lending agencies means the Finance Ministry, agencies or organizations authorized by the Finance Ministry to re-lend the Government's foreign loan capital, supervise the use of such re-lent capital, recover it and enjoy a re-lending charge according to the provisions of law.

21. Re-lending agreement means a re-lending contract or sub-agreement between a re-lending agency and a re-borrower of the Government's foreign loan capital.

22. Re-borrowers of the Government's foreign loan capital (called re-borrowers for short) mean enterprises, organizations concluding re-lending agreements and acknowledging debts with re-lending agencies. Re-borrowers may also be:

- Enterprises or organizations investing in projects funded with the Government's foreign loans under the re-lending mechanism;

- Local administrations which are entitled to borrow the Government's foreign loans for local investment projects.

23. Domestic contributed capital means the necessary amount of domestic capital to be spent together with foreign loan capital by the Vietnamese party for the implementation of projects.

Domestic contributed capital may be in foreign currencies (deposits, money for the importation of machinery and equipment in cases where the use of loan capital is not allowed...) or in Vietnam dong (expenses for surveys, designs, compensations for ground clearance, construction and installation, project management, payment of taxes prescribed by law, and insurance, etc.).

Chapter II

STATE MANAGEMENT OF NATIONAL FOREIGN DEBTS AND THE REPAYMENT THEREOF

Article 3.- Management objectives

1. To meet the capital mobilization requirements of different economic sectors at the lowest costs for national development investment and economic restructuring according to socio-economic development orientations and strategies.

2. To ensure the efficient management, allocation and use of capital, minimize risks and pressure on national resources (state budget, national foreign exchange reserve fund), ensure debt safety and national financial security.

3. To create conditions for enhancement of international economic integration.

Article 4.- Management contents and principles

1. The Government shall perform unified and comprehensive management of national foreign debts, covering the mobilization, reception, allocation, use, management, monitoring and supervision of foreign loans with the following instruments:

a/ A long-term debt strategy, a medium-term debt management program and annual national plans on the raising of foreign loans and repayment of foreign debts, which are subject to approval by the Prime Minister;

b/ Appropriate policies and mechanisms and the assignment of management responsibilities among state management agencies according to the provisions of this Regulation.

2. Efficiency of programs and projects funded with loan capital shall be the first and foremost important criterion in deciding on the borrowing of foreign capital.

3. To ensure the balance between loans and repayment capability, the foreign currency balance and other macro economic balances for a long term.

4. Local administrations, mass organizations, administrative management agencies at all levels as well as political, social and professional organizations must not borrow capital directly from foreign countries, except for special cases permitted by current law or the Prime Minister.

5. All foreign loans specified in Clause 2, Article 2 of this Regulation must be officially registered with competent Government agencies after loan agreements are concluded according to Article 6 of this Regulation.

6. Where a draft loan agreement or guarantee has contents contrary to or not yet provided for in Vietnamese legal documents or contains institutional or policy commitments falling beyond its competence, the agency assuming the prime responsibility for negotiation for the agreement must gather comments of relevant agencies and report them to the Prime Minister for consideration and decision.

7. The conclusion of the Government's foreign loan agreements shall comply with the provisions of law on conclusion, accession to and implementation of treaties. Where it is otherwise provided for by agreements between Vietnamese competent authorities and lenders, such agreements must be complied with.

Article 5.- Long-term debt strategy, medium-term debt management program, annual plans on the raising of foreign loans and repayment of foreign debts

1. A long-term debt strategy has the following principal contents:

a/ An evaluation of the actual status of foreign debts, and the management thereof in the past time;

b/ Objectives, orientations and the system of national criteria for raising of foreign loans and repayment of foreign debts, classified by economic sectors;

c/ Solutions and policies for management of national foreign debts;

d/ The organization of implementation of the strategy.

2. A medium-term debt management program has the following principal contents:

a/ An evaluation of, and forecasts on, conditions of domestic and international capital markets, fluctuations of exchange rates and interest rates, which shall serve as bases for appropriate adjustment to the policy on the raising of foreign loans and repayment of foreign debts in each period;

b/ The balance of foreign loan demand to offset the state budget deficit and invest in development on the basis of balancing domestic loan capital sources;

c/ A plan for foreign loan mobilization by the public sector: the structure of expected loan sources (according to the conditions on preferential loans, commercial loans, lenders, markets, loan currencies, loan terms and average interest rates under loan agreements), a mechanism for the use of loans (allocation, re-lending);

d/ Forecast on foreign loan mobilization by the private sector for a medium period (between three to five years) and for each year;

e/ An evaluation of, and forecasts on, changes in the list of debts of the public sector (currencies, average interest rate, average term, risks in terms of exchange rates) and the status of national debts for a medium period (between three and five years) and for each year;

f/ Proposals on necessary solutions and schemes to handle debts or restructure the list of debts of the public sector in order to settle bad debts and reduce liabilities.

3. Annual plans on the raising of foreign loans and repayment of foreign debts shall each have the following principal contents:

a/ The annual situation of the raising of foreign loans and repayment of foreign debts of the country, an analysis of the actual status of national foreign debts according to international standards, an assessment of risks and the extent of reserve liabilities of the state budget;

b/ A plan on the withdrawal of loan capital and repayment of foreign debts of the public sector, including debts of the Government, enterprises and organizations in the public sector;

c/ The total limit of national foreign commercial loans, including the limit of foreign loans of the public sector and forecasted level of foreign loans of the private sector.

Article 6.- Assignment of responsibilities for state management over the raising of foreign loans and the repayment of foreign debts

1. The Finance Ministry, the major Government agency performing state management of the raising of foreign loans and repayment of national foreign debts, shall have to:

a/ Assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and the State Bank of Vietnam in, elaborating and submitting to the Prime Minister for approval a medium-term debt management program, annual plans on the raising of foreign loans and repayment of foreign debts on the basis of synthesizing plans on the raising of foreign loans and repayment of foreign debts of the Government and organizations in the public sector and the total limit of national foreign commercial loans;

b/ Assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment in, elaborating and submitting to the Prime Minister for approval a scheme for mobilization and a plan for use of foreign commercial loan capital by the Government when the latter has a demand therefor;

c/ Assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and the State Bank of Vietnam in, elaborating and submitting to the Prime Minister for promulgation a system of criteria for monitoring national debts and a process of gathering, reporting, summing up, sharing and publicizing information on foreign debts;

d/ Organize the negotiation on, and conclusion of, treaties on foreign loans of the Government and Government guarantees for foreign loans under authorization or assignment by the Prime Minister;

e/ Act as the official representative of the borrower, with regard to foreign loans of the State or the Government in specific loan agreements;

f/ Perform the financial management of the Government's foreign loans, including:

- Organizing the registration of loans;

- Formulating financial management regimes, elaborating and promulgating a Regulation on re-lending of the Government's foreign loan capital in the country; guiding and organizing the re-lending of the Government's foreign loan capital and retrieving the re-lent capital; reporting to the Prime Minister on the use of this capital source.

g/ Manage Government guarantees under the Regulation on grant and management of the Government guarantees for foreign loans, including:

- Guiding the process of considering and granting Government guarantees, appraising conditions for the grant of guarantees and guarantee dossiers for specific programs and projects, to be submitted to the Prime Minister for decision on the guarantee; directly granting Government guarantees; organizing the management of Government guarantees as for the Government's foreign loans;

- Performing the guarantor's obligations toward foreign lenders;

- Inspecting, supervising business results, the use of foreign loan capital and repayment of foreign debts by the guaranteed; applying financial instruments and measures provided for by law to claim debts repaid for the guaranteed and relevant costs.

h/ Assume the prime responsibility for building and managing the Government's foreign debt database, the situation of national foreign loans and repayment thereof; act as the major agency in publicizing and providing information on the Government's foreign loans and repayment thereof as well as the national foreign loans and repayment thereof in accordance with the provisions of law;

i/ Ensure the fulfillment of the Government's obligations to repay foreign debts in a timely and most beneficial manner, including: organizing the repayment of the Government's foreign debts with the State budget; setting up an accumulated fund and organizing the management of its use for repayment of foreign debts; elaborating, proposing and submitting to the Prime Minister for approval and organizing the implementation of schemes on handling and restructuring of the Government's foreign debts when necessary;

j/ Perform tasks assigned by the Government under its Regulation on management and use of ODA;

k/ Conduct post-investment assessment of programs and projects funded with the Government's foreign commercial loan capital and those funded with foreign loans guaranteed by the Government.

2. The Ministry of Planning and Investment shall have to:

a/ Assume the prime responsibility for, and coordinate with the Finance Ministry and the State Bank of Vietnam in, elaborating and submitting to the Prime Minister for approval a long-term debt strategy within the overall strategy on mobilization of investment capital for the economy;

b/ Assume the prime responsibility for, and coordinate with the Finance Ministry in, elaborating and submitting to the Prime Minister for approval a list of programs and projects allocated or re-lent with the whole or part of the Government's foreign loan capital;

c/ Coordinate with the Finance Ministry in establishing a system of debt monitoring criteria, a medium-term debt management program and annual plans on national foreign loans and repayment thereof, and oversee macro indices on national foreign debts;

d/ Coordinate with the Finance Ministry in formulating a process of gathering, reporting, synthesizing, sharing and publicizing information on foreign debts prior to its submission to the Prime Minister for promulgation;

e/ Perform tasks assigned by the Government in its Regulation on management and use of ODA.

3. The State Bank of Vietnam shall have to:

a/ Perform the state management of the raising of foreign loans and repayment of foreign debts by enterprises and organizations in the public sector; supervise and monitor the raising of foreign loans and repayment of foreign debts by the private sector; guide and inspect the guarantee of foreign loans by commercial banks and other licensed organizations according to the provisions of law;

b/ Assume the prime responsibility for, and coordinate with relevant agencies in, setting the annual limit of foreign commercial loans of enterprises and organizations in the public sector and forecast such limit in the private sector, which shall be sent to the Finance Ministry for sum-up and incorporation in the total annual limit of foreign commercial loans of the public sector and the whole country for submission to the Prime Minister for approval;

c/ Assume the prime responsibility for, and coordinate with the Finance Ministry in, controlling the annual limit of foreign commercial loans of enterprises and organizations, which has been approved by the Prime Minister;

d/ Sum up the situation of raising of foreign loans and repayment of foreign debts by enterprises and organizations in the public sector and the private sector, report it to the Prime Minister and concurrently send a report to the Finance Ministry for summing up the situation of raising of foreign loans and repayment of foreign debts of the whole country;

e/ Guide and organize the registration of foreign loans of enterprises and organizations in the public sector and the private sector (including loans guaranteed by the Government);

f/ Supervise monetary channels related to the raising of foreign loans and repayment of foreign debts in service of synthesizing the international payment balance and controlling monetary and foreign exchange management policies;

g/ Establish an early warning system for debt risks of enterprises;

h/ Coordinate with the Finance Ministry in establishing a system of debt monitoring criteria, a medium-term debt management program and annual plans on the raising of foreign loans and repayment of foreign debts;

i/ Coordinate with the Finance Ministry in formulating a process of gathering, reporting, synthesizing, sharing and publicizing information on foreign debts, and submit it to the Prime Minister for promulgation;

j/ Perform tasks assigned by the Government in its Regulation on ODA management and use.

4. The Justice Ministry shall have to:

a/ Give its opinions on legal issues in agreements on the Government's foreign loans and debt repayment and agreements on the Government guarantees before they are submitted to the Prime Minister for decision; contribute its opinions in case of necessity on other legal issues related to documents on foreign loans and debt repayment of domestic enterprises and economic organizations at the request of lenders and guarantors;

b/ Evaluate the inconsistency between the agreements on the Government's foreign loans and debt repayment and domestic law; oversee the handling thereof in the course of implementation of commitments on the raising of foreign loans and repayment of foreign debts;

c/ In case of necessity, issue legal opinions on the agreements on the Government's foreign loans and debt repayment and agreements on loans guaranteed by the Government as well as legal opinions on the legal status of lenders and guarantors at the latter's request.

5. Other relevant agencies shall have to coordinate with the Finance Ministry and the State Bank of Vietnam in performing the state management over the raising of foreign loans and repayment of foreign debts according to their functions and competence and the provisions of this Regulation.

Article 7.- Inter-branch coordination in management of foreign debts

Based on the practical requirements of the foreign debt management and at the request of the Finance Minister, the Prime Minister may establish an inter-branch coordinating organization for foreign debt management or use the existing coordination mechanism suitable with the Government's functions and powers in accordance with the provisions of law.

Chapter III

MANAGEMENT OF FOREIGN LOANS AND REPAYMENT OF FOREIGN DEBTS OF THE PUBLIC SECTOR

Article 8.- Objectives

To ensure the effective mobilization of capital sources for development investment; minimize costs and risks of transactions on capital mobilization and use; ensure the settlement of liabilities of the public sector (including direct and reserve liabilities) on the basis of closely monitoring them, minimizing risks for the state budget and maintaining national debt safety.

Section 1. MANAGEMENT OF FOREIGN LOANS AND REPAYMENT OF FOREIGN DEBTS OF THE GOVERNMENT

Article 9.- Basic requirements

1. The raising of foreign loans and repayment of foreign debts by the Government must be conducted uniformly according to the principles for management of national foreign debts provided for in Article 4 of this Regulation.

2. To arrange capital sources suitable with the use purposes, ensuring the efficient use of capital, creating foreign currency sources and domestic savings sources to meet the development objectives and ensure the debt repayment as well.

3. To make fullest use of all preferential loans on the basis of considering their benefits and costs, prioritizing the use of preferential loans for socio-economic infrastructure development.

4. To carefully manage foreign commercial loans of the Government. Not to use foreign commercial loans for programs and projects incapable of direct capital recovery or short-term commercial loan capital for long-term objectives, except for special cases permitted by the Prime Minister.

5. To take measures for debt restructuring, roll-over, borrowing of new loans and repayment of old debts, etc., as well as modern debt-managing measures on the basis of analyzing the list of debts and grasping market conditions in order to minimize credit and foreign exchange risks as well as state budget expenditure in the raising of foreign loans and repayment of foreign debts.

Article 10.- Management principles

1. The Minister of Finance shall take responsibility before the Government for the unified management of foreign loans and repayment of foreign debts of the Government on the basis of the long-term debt strategy and medium-term debt management program; monitor and oversee foreign loans and repayment of foreign debts according to annual loan limits and debt repayment plans; apply appropriate financial policies and instruments to ensure the reasonable structure, terms and total of debts, apply measures and penalties prescribed by law to ensure financial discipline in the management of foreign loans and repayment of foreign debts.

2. Local administrations must not directly raise foreign loans. Where they are permitted by law or authorized and permitted by the Prime Minister to apply special mechanisms, provincial/municipal administrations may mobilize foreign loan capital for investment in infrastructure development which falls within the spending task of the provincial-level budget on the following principle: Localities shall elaborate projects, take initiative in seeking loan sources, coordinate with relevant agencies in conducting negotiations on foreign loans, gathering opinions of the Finance Ministry, the Ministry of Planning and Investment, and the State Bank of Vietnam on the loan contents and conditions before submitting them to the Prime Minister for consideration and decision according to the mechanism of re-lending the Government's loan capital. Localities shall have to arrange provincial-level budgets to fully repay debts in accordance with the provisions of law.

3. Agencies and organizations receiving and using foreign loan capital of the Government or guaranteed by the Government must use such capital efficiently, for proper purposes and in accordance with the contents of programs or projects already approved by competent authorities.

Article 11.- Foreign commercial loans of the Government

1. Depending on the demand for development investment capital, the Government shall mobilize foreign commercial loan capital directly through financial borrowing, export credit borrowing, issue of government bonds to the international capital market, or in other appropriate forms within the Government's annual commercial loan limit already approved by the Prime Minister.

2. Foreign commercial loans of the Government shall be only used for the following purposes:

- Re-lending to the State's key development programs and projects that have the demand for importation of equipment and technologies, are capable of direct capital recovery and debt repayment, or

- Rolling over foreign debts of the Government on the principle of assuring benefits for the state budget at the lowest costs.

3. Where the Government wishes to raise foreign commercial loans, the Finance Ministry shall assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment in, working out schemes for mobilization and plans for use of loan capital, and submit them to the Prime Minister for consideration and decision on a case-by case basis. In case of issuing bonds in the name of the State or the Government to the international capital market to borrow capital, the Government's current regulations on issue of international bonds shall be complied with.

Article 12.- Financial mechanism for use of foreign loans of the Government

1. For programs and projects of investment in infrastructure or social welfare and projects in other fields, which are incapable of direct capital recovery and are targets of state budget spending, including cases where local budgets are entitled to re-borrow foreign loan capital from the central budget for allocation to programs and projects: They shall be allocated with foreign loan capital according to the mechanism of state budget capital allocation.

2. For development investment programs and projects capable of full or partial capital recovery (including infrastructure projects): They shall be subject to the mechanism of re-lending the whole of capital or re-lending a part of capital and allocating a part of the state budget, depending on their capital recoverability.

3. For loans in foreign currencies or in goods not directly associated with projects:

a/ Foreign loans in foreign currencies include:

- Loans in support of the state budget and those raised by way of issue of international bonds, which are accounted as state budget revenues and transferred into the centralized foreign currency fund managed by the Finance Ministry;

- Foreign currencies borrowed in support of the international payment balance, which are sold by the Finance Ministry to the State Bank of Vietnam for transfer into the foreign exchange reserve fund managed by the latter, and of which the respective Vietnam dong amount is remitted into the state budget;

Loans in support of the payment balance under monetary swapping agreements (amounts in foreign currencies for swapping are borrowed from foreign central banks) shall be managed, used, repaid and recovered in the domestic currency by the State Bank of Vietnam.

- All foreign currency loans shall be used according to specific decisions of the Prime Minister and the lenders' requirements.

b/ Foreign loans in goods:

- In cases where loan agreements specify domestic goods users: The Finance Ministry shall convert such loans into Vietnam dong for accounting into the state budget and allocate or re-lend the capital to the specified good users;

- In cases where loan agreements specify domestic users of loan capital in goods: The Finance Ministry shall assume the prime responsibility for organizing the importation and auction of goods and remit the proceedings therefrom into the state budget for use in accordance with the loan agreements;

- In cases where loan agreements do not specify any users of loan capital: The Finance Ministry shall assume the prime responsibility for organizing the importation and auction of goods and remit money gained therefrom into the state budget for use under decisions of the Prime Minister.

Article 13.- Re-lending of foreign loans of the Government

1. The Finance Ministry shall organize the re-lending of foreign loans of the Government through authorized organizations, including the Development Assistance Fund, commercial banks and the Social Policy Bank (called re-lending agencies).

2. The re-lending agencies shall have to manage and recover capital from re-borrowers for remittance into the accumulated fund for repayment of foreign debts, and at the same time, be entitled to enjoy a re-lending charge as prescribed.

3. The re-lending of foreign loans of the Government shall comply with the following principal conditions:

a/ Re-lending currencies:

- For ODA loans of the Government: The re-borrowers may select re-lending currencies, which may be the domestic currency or foreign currencies, depending on their debt-repayment capability;

- For foreign commercial loans of the Government: The re-borrowers shall have to re-borrow capital in the original foreign currencies in which the Government has borrowed the loans, except for special cases to be decided by the Prime Minister.

b/ Re-lending terms: The re-lending terms shall correspond to the capital-recovery terms stated in feasibility study reports or reports on work construction investment or economic-technical reports on work construction already approved by competent authorities in accordance with the provisions of law;

c/ Re-lending interest rates and charges:

- For foreign commercial loans of the Government: The re-lending interest rate shall be calculated according to the market interest rate and must be at least equal to the foreign loan interest rate plus foreign loan charges and domestic re-lending service charges;

- For ODA loans: Interest rates of re-lending in the domestic currency shall be determined according to economic-technical branches, loan currencies, loan terms and capital recoverability of programs or projects, ensuring equal treatment of programs and projects of similar nature in the same branch. This interest rate shall cover also the domestic re-lending charge and must not exceed the State's preferential credit interest rate provided for in each period;

In cases where the re-borrowers request to re-borrow capital in foreign currencies, the re-lending interest rate shall be equal to the interest rate of re-lending capital in the domestic currency specified for the corresponding economic-technical branch, minus the foreign exchange risk ratio set for each currency, which, however, must not be lower than the foreign loan interest rate in all circumstances.

The Finance Ministry shall set and submit to the Prime Minister for approval a bracket of domestic currency re-lending interest rates to be uniformly applied to economic-technical branches. Annually, based on the approved interest rate bracket and depending on fluctuations in the financial and monetary market, the Finance Ministry shall adjust re-lending interest rates and announce them.

d/ The Finance Ministry shall determine specific re-lending conditions and sign authorized re-lending contracts (or loan sub-agreements and re-lending authorization contracts) on a case-by-case basis according to the above-mentioned principal conditions. In particular cases where different conditions are required, the Finance Ministry shall report them to the Prime Minister for decision.

The Government shall not consider to arrange capital for programs or projects entitled to re-borrow foreign capital of the Government but incapable of debt repayment under the re-lending conditions promulgated by the Finance Ministry.

d/ Re-borrowers:

Enterprises, economic organizations of all economic sectors, if having feasible investment projects compatible with the State development investment list and planning already approved by competent authorities according to current regulations, wishing to use foreign loan capital of the Government, being capable to repay debts and having a healthy financial state, shall be considered for re-borrowing foreign loan capital of the Government.

e/ Mortgage assets:

Depending on specific re-borrowers, re-lending agencies may request the mortgage of assets to secure loans, including assets created from loan capital and other assets prescribed by law.

Article 14.- Re-borrowing of foreign loan capital of the Government by local administrations

In a number of special cases permitted by law or the Prime Minister, provincial/municipal administrations, if being able to ensure the budget balance for debt repayment, may re-borrow foreign loan capital of the Government (through the Finance Ministry) for execution of local works and projects. Provincial/municipal People's Committee presidents shall be local representatives to sign re-lending agreements and acknowledge debts with the Finance Ministry. Such debts shall be repaid with local budgets.

Article 15.- Responsibilities of re-borrowers of foreign loan capital of the Government

In all circumstances, re-borrowers must take responsibility before law for performing all commitments and liabilities under the concluded re-lending agreements; regularly and periodically report on the status of loans, debt-repayment capability and all related matters to the managing agencies, the re-lending agencies and the Finance Ministry; coordinate with and create conditions for audit agencies and inspection agencies to oversee loans.

Article 16.- Responsibilities and powers of re-lending agencies

1. Re-lending agencies shall have to re-evaluate the financial schemes of re-borrowing programs or projects, the financial capacity of re-borrowers and report the re-evaluation results to the Finance Ministry before signing re-lending agreements (including programs and projects for which investment decisions have been issued). In case of re-lending under designation by the Prime Minister, re-lending agencies shall neither conduct the re-evaluation nor bear credit risks.

2. Re-lending agencies shall have to recover the re-lent capital fully and on schedule and refund it to the state budget through the accumulated fund for repayment of foreign debts under the guidance of the Finance Ministry.

3. Re-lending agencies may apply necessary measures conformable with current credit regulations and the provisions of law to ensure the retrieval of debts and refunding of capital to the state budget in full and on schedule. In case of failing to retrieve debts after applying all the above-mentioned measures, re-lending agencies shall report thereon to the Finance Ministry for handling measures.

Article 17.- Arrangement of domestic contributed capital

All programs and projects funded with foreign loan capital of the Government must be arranged with domestic contributed capital fully and promptly.

For programs and projects entitled to state budget funds: They shall be allocated with domestic contributed capital from the budget of the same level. Investors and managing agencies shall have to calculate all domestic contributed capital demands, work out annual plans thereon and send them to planning agencies and finance agencies for incorporation in the annual state budget plan.

For programs and projects subject to the mechanism of re-borrowing (wholly or partially) foreign loan capital of the Government: Investors shall have to arrange domestic contributed capital sources by themselves and be given priority to borrow capital from the State credit sources or from the Development Assistance Fund.

Article 18.- Repayment of foreign debts of the Government

Based on the annual state budget plan on repayment of foreign debts already approved by the Government, the Finance Ministry shall organize the repayment of debts according to commitments with foreign lenders under loan agreements or the Government guarantees. In case of necessity, the Finance Ministry shall assume the prime responsibility and coordinate with the concerned ministries and branches in negotiating with foreign creditors on the limits, terms and appropriate forms of debt repayment (in cash, goods, export services, debt conversion or restructuring, etc.).

State budget amounts, which have been spent for repayment of foreign debts in relation to loans used for re-lending or for repayment of debts for the guaranteed, shall be refunded from the accumulated fund for foreign debt repayment.

Article 19.- Responsibility for guiding the implementation

The Finance Ministry shall assume the prime responsibility for, and coordinate with relevant agencies in, elaborating a regulation on re-lending foreign loan capital of the Government according to the provisions of Section 1, Chapter III of this Regulation and submit it to the Prime Minister for promulgation.

Section 2. MANAGEMENT OF GOVERNMENT GUARANTEES FOR FOREIGN LOANS

Article 20.- General provisions

Government guarantees are the highest guarantees provided by the State of the Socialist Republic of Vietnam for foreign loans.

Article 21.- Conditions for the grant of Government guarantees to borrow foreign capital

1. Subjects to be considered for the grant of Government guarantees (the guaranteed) are domestic enterprises, economic organizations and credit institutions of all economic sectors which directly conclude loan agreements with foreign lenders by mode of self-borrowing and self-repayment for execution of investment or credit programs or projects; have the operation situation as prescribed in paragraph 6, Article 22 of this Regulation.

2. Types of program or project to be considered for the grant of Government guarantees:

a/ Key investment programs or projects for which the National Assembly or the Prime Minister has approved investment guidelines, or

b/ Programs or projects on importation of hi-tech equipment or production of goods, provision of export services and those in the domains entitled to the State investment priority, which are capable of repaying debts, or

c/ Programs or projects supported with commercial loans accompanying ODA capital sources, creating aid capital sources in the form of mixed credits, or

d/ Programs or projects borrowing capital from credit institutions which have been appraised and requested for the grant of Government guarantees by the State Bank of Vietnam.

3. The owner's capital of investors for programs or projects must not be lower than 20% of the total investment level for such programs or projects.

4. Foreign commercial loans guaranteed by the Government for programs or projects must fall within the total annual limit of foreign commercial loans of the Government already approved by the Prime Minister.

Article 22.- Dossiers for the grant of Government guarantees shall each comprise:

1. The foreign lender's official request for Government guarantee.

2. The guaranteed's official request to the Prime Minister for the guarantee of a foreign loan.

3. The investment decision, the feasibility study report/work construction investment report of the program or project approved by a competent authority according to current regulations, which assures that such program or project meets the conditions for Government guarantee to borrow foreign capital in accordance with the provisions of Article 21 of this Regulation.

4. The financial plan ensuring the capital recoverability, which has been evaluated and accepted by the guarantee-granting body. Programs or projects of credit institutions must have financial plans evaluated and requested for the grant of Government guarantees by the State Bank of Vietnam.

5. The loan agreement or commercial contract, which has been concluded and approved by the competent agency under current regulations (in cases where the foreign loan is used to finance commercial contracts).

6. The audited financial statements or the proof given by a competent agency that the guaranteed conducts business activities and has a normal financial state, suffers no losses in three latest consecutive years, has no overdue debts at home or overseas. In cases where the guaranteed has not operated for full three years yet, there must be a written commitment of its managing agency to assure the debt-repayment capability or a financial plan to ensure the debt-repayment capability, which has been evaluated and accepted by the guarantee-granting body.

Article 23.- Levels of government guarantees

The Government-guaranteed loans must each have a minimum value of USD 10 million (except for commercial loans accompanying ODA capital for financial support in the form of mixed credits).

Article 24.- Guarantee charges

1. The Finance Ministry shall specify the charge level for each program or project on the basis of the guarantee term and risk assessment, which, however, must not exceed 1.5%/year of the loan amount under guarantee.

2. Guarantee charges shall be remitted into the accumulated fund for repayment of foreign debts under the guidance of the Finance Ministry to serve as a reserve source for debt repayment in cases where the guaranteed fail to repay debts.

Article 25.- Mortgage assets for loans guaranteed by the Government

All assets created from foreign loan capital guaranteed by the Government may be used as mortgages for Government guarantees and must not be used as mortgages to borrow capital directly from other sources.

Article 26.- Responsibilities of the guaranteed

1. To supply dossiers on the grant of Government guarantees and related necessary documents for the Finance Ministry to evaluate and request the Prime Minister to decide on guarantee.

2. To perform the borrowers' obligations under the concluded loan agreements and obligations of the guaranteed towards the Finance Ministry according to the Regulation on management of Government guarantees for foreign loans, issued according to the provisions of Article 27 of this Regulation.

3. To supply the Finance Ministry periodically or when necessary with financial statements, which have been audited or certified by superior state financial management agencies; report on the plans for and the situation of capital withdrawal, debt repayment and debt balance; report on the implementation of programs and projects and special circumstances which affect such implementation and the fulfillment of payment obligations under loan agreements.

4. To create conditions for the Finance Ministry to inspect the implementation of programs and projects when necessary.

5. To pay guarantee charges promptly and fully to the Finance Ministry according to the provisions of Article 24 of this Regulation.

Article 27.- Responsibilities for guiding implementation

The Finance Ministry shall assume the prime responsibility for, and coordinate with concerned agencies in, elaborating a Regulation on grant and management of Government guarantees for foreign loans according to the principles mentioned in Section 2, Chapter III of this Regulation and submit it to the Prime Minister for promulgation.

Section 3. MANAGEMENT OF FOREIGN LOANS AND REPAYMENT OF FOREIGN DEBTS OF ENTERPRISES AND ECONOMIC ORGANIZATIONS IN THE PUBLIC SECTOR (called state enterprises for short)

Article 28.- Management principles and modes

1. State enterprises may directly borrow foreign capital by mode of independent borrowing and repayment to foreign lenders under the conditions committed in loan agreements.

2. The Government shall not bear responsibility for foreign loans raised by state enterprises themselves, except for those guaranteed by the Government as mentioned in Section 2, Chapter III of this Regulation.

3. Medium- and long-term foreign commercial loans of state enterprises must be included in the annual plan on the total commercial loan limit already approved by the Prime Minister and meet the conditions on medium- and long-term loans set by the State Bank of Vietnam in each period; must be registered with, certified by, and reported on the capital withdrawal, use and repayment to, the State Bank of Vietnam, according to the reporting regime provided for by its Governor.

4. Where state enterprises borrow foreign capital by way of issue of international bonds, they must elaborate issue schemes and get evaluation comments of the Finance Ministry and the State Bank of Vietnam before submitting them to competent authorities for approval.

5. Short-term foreign loans of state enterprises must be included in the annual plan on the total foreign commercial loan limit already approved by the Prime Minister and satisfy the conditions for short-term loans set by the State Bank Governor in each period.

6. The withdrawal of capital and transfer of money to repay debts of state enterprises must be effected through banks operating in the Vietnamese territory, which are licensed to conduct foreign exchange activities, except for the withdrawal of capital for direct payment to foreign suppliers. In case of capital withdrawal and debt repayment with assets or goods (tangible or intangible) not through a bank, enterprises must report thereon according to regulations of the State Bank and, when necessary, get comments of state management agencies in relevant branches and domains.

7. State enterprises borrowing foreign capital must use loan capital for the right purposes, must not use short-term loan capital for investment in medium- or long-term projects, must repay debts (principals and interests) strictly according to commitments in loan agreements signed with foreign lenders, bear all risks and responsibilities before the laws of the State in the course of raising foreign loans and repaying foreign debts.

8. With regard to medium- and long-term loans of state enterprises, the banks may withdraw capital and transfer money to repay debts to foreign parties only when the loans have been registered according to regulations.

9. The State Bank of Vietnam shall coordinate with the Finance Ministry in guiding in detail the process of management of foreign loans and repayment of foreign debts of state enterprises so as to implement the provisions of this Article.

Article 29.- Forms of loan security

1. Where foreign lenders request that loans of state enterprises be guaranteed by the Government, the provisions of Section 2, Chapter III of this Regulation and the Regulation on grant and management of Government guarantees for foreign loans must be complied with.

2. Where foreign lenders request guarantees from commercial banks or other financial or credit institutions, the guarantee shall be effected under the Regulation on guarantee and re-guarantee for foreign loan capital, promulgated by the Governor of the State Bank of Vietnam.

3. State enterprises borrowing foreign capital may seek a guarantee from non-residents (banks, financial or credit institutions or foreign companies, etc.) but must ensure that guarantee be not contrary to current provisions of Vietnamese law.

4. Banks and organizations licensed to grant guarantees under current provisions of law shall decide on, and take final responsibility for, the guarantee for foreign loans of state enterprises. Where the guaranteed enterprises cannot repay foreign debts when they become due, the guarantors shall have to repay such debts for them, and have the right to concurrently apply necessary measures compliant with the regulations on credit and other provisions of Vietnamese law to retrieve the amounts paid for the enterprises.

5. State enterprises may use assets created from loan capital or other forms of security compliant with Vietnamese law to secure foreign loans.

6. With regard to unguaranteed or unsecured foreign loans, the loan agreement parties shall reach agreement on their responsibilities for risks.

Chapter IV

MANAGEMENT OF FOREIGN LOANS AND REPAYMENT OF FOREIGN DEBTS OF ENTERPRISES AND ECONOMIC ORGANIZATIONS IN THE PRIVATE SECTOR (called private enterprises for short)

Article 30.- Management principles

1. Foreign loans of private enterprises shall be overseen and monitored by the Government. The agency overseeing and monitoring them on behalf of the Government is the State Bank of Vietnam.

2. Private enterprises must register loans with the State Bank of Vietnam after concluding loan agreements with foreign parties and observe the reporting regime according to regulations of the Governor of the State Bank of Vietnam.

3. Private enterprises using foreign loan capital shall take full responsibility for repayment of foreign debts strictly according to the provisions of loan agreements, Vietnamese law and international legal practices.

4. With regard to medium- and long-term loans of private enterprises, domestic banks can withdraw capital and transfer money to repay debts to foreign parties only when the loans have been registered according to regulations.

Article 31.- Application of principles for management of debts of the public sector

Where loans of private enterprises are guaranteed by the Government or licensed organizations in the public sector (state-run financial/credit institutions, etc.), the management and supervision of such loans shall comply with the provisions of Sections 2 and 3, Chapter III of this Regulation.

Article 32.- Responsibility for guiding implementation

The Governor of the State Bank of Vietnam shall guide in detail the process of overseeing and monitoring foreign loans and repayment of foreign debts of the private sector according to the principles in this Chapter.

Chapter V

INSPECTION, SUPERVISION OF, AND REPORTING ON, THE RAISING OF FOREIGN LOANS AND REPAYMENT OF FOREIGN DEBTS

Article 33.- Inspection and supervision

1. Ministers, ministerial-level agencies, heads of the Government-attached agencies and presidents of provincial/municipal People's Committees shall be accountable to the Prime Minister for inspecting and supervising the reception and use of foreign loan capital under their respective management.

2. The Finance Ministry, the State Bank of Vietnam, the Ministry of Planning and Investment and the Government Office shall have to guide and assist ministries, branches and localities in the inspection and supervision work and at the same time, according to their functions, directly inspect and supervise the management of the use of foreign loan capital of the Government as well as the performance of obligations by units using foreign loan capital in compliance with the provisions of foreign loan agreements or re-lending agreements.

3. The Ministry of Planning and Investment and the managing agencies shall have to inspect and supervise investment projects or construction works funded by foreign loan capital according to the current provisions of law on investment and construction management.

Article 34.- Reporting regime

1. All units receiving and using foreign loan capital must make quarterly, annual or extraordinary reports and assessments on the withdrawal and use of foreign loan capital and repayment of foreign debts, and send them to the managing agencies, the loan-managing body being the Finance Ministry or the State Bank of Vietnam, the guaranteeing agencies and the re-lending agencies under the guidance of these agencies.

2. Ministries, ministerial-level agencies, provinces and centrally-run cities shall make the following sum-up reports:

a/ Biannual and annual sum-up reports on the raising of foreign loans, use of foreign loan capital and repayment of foreign debts by their respective branches or localities;

b/ Reports on annual budget estimates of ministries or localities, clearly stating the expected withdrawals of foreign loan capital, the arrangement of domestic contributed capital for programs and/or projects according to the common tempo set by the Government for annual budget estimation;

c/ Final settlement reports on projects which have been completed and put to use and have been funded by foreign loan capital of the Government in strict compliance with the State's current regulations.

3. The Finance Ministry and the State Bank of Vietnam shall have to make sum-up reports to the Prime Minister on the raising of foreign loans and repayment of foreign debts according to their assigned responsibilities defined in this Regulation.

Chapter VI

COMMENDATION, AND HANDLING OF VIOLATIONS

Article 35.- Organizations and individuals making achievements in the management of debts shall be commended or rewarded according to the provisions of law.

Article 36.- Heads of agencies directly managing state enterprises and state-run credit institutions borrowing foreign capital shall take responsibility before the Government for the efficiency of loan projects they have approved or requested competent authorities to approve.

Where the implementation fails to comply with current regulations on consideration, approval or appraisal of investment schemes funded by loan capital or investment decisions fail to comply with investment guidelines, thus causing economic losses, the people having elaborated and approved such schemes shall, depending on the extent of losses, have to take responsibility therefor before law.

Article 37.- Investors using foreign loan capital, if letting debts unpaid due to subjective causes such as inefficient use of capital, waste or loss of capital, thus adversely affecting the Government's prestige and harming the state budget, shall have to take responsibility therefor before law.

Article 38.- Organizations and individuals violating this Regulation and relevant legal documents shall, depending on the nature and seriousness of their violations, be administratively handled or have to pay compensation therefor under the provisions of law. In case of serious violations, they shall be examined for penal liabilities.